Company update: A mixed bag
- Office portfolio occupancy improved as vacant space at The Harvest was gradually filled up
- Vacancy at Sheung Shui Centre Shopping Arcade is set to rise due to departure of a kindergarten tenant
- Negative rental reversion in place
The overall occupancy improved mildly to 95% in Mar-22 from Dec-21’s 94.5% on higher office occupancy. Office portfolio occupancy rose 1ppt q-o-q to 94.3% in Mar-22 as Sunlight REIT secured beauty tenants for the space vacated by Chong Hing Bank at The Harvest, where occupancy rebounded to 80.4% in Mar-22 from Dec-21’s 66.4%. Strand 50 in Sheung Wan saw its occupancy improving to 97.7% in Mar-22. However, the occupancy at flagship property Dah Sing Financial Centre was below-average at 91.4%, partly reflecting the subdued leasing demand from multinational firms.
Retail portfolio was 96.6% let in Mar-22 (Dec-21: 97.1%). Occupancy at Metro City Ph 1 property was firm at 98% in Mar-22. Sheung Shui Centre Shopping Arcade was 94.8% occupied in Mar-22 but the vacancy is set to rise upon the departure of a kindergarten tenant which currently takes up c.7.5% of its gross rental area.
Negative rental reversion continued to work its way through the portfolio. Office and retail rentals fell 7.6% and 7% respectively on lease renewals in 1Q22 or 3QFY22 (1HFY22: 4.5%/4.9%). This resulted in office and retail passing rents falling 0.3ppt q-o-q and 0.6ppt q-o-q to HK$35.3psf and HK$68psf in Mar-22.
Sunlight REIT resumed unit buyback and repurchased 111,000 units for HK$0.42m or HK$3.82/unit on 20 Apr 22.
We have BUY call on Sunlight REIT with HK$5.01 TP